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They look like something out of the 1979 Mad Max movie.
Two towering robotic arms located in a steel cage are swinging glowing orange slabs of North American-sourced 1080 steel. The $2 million machines, affectionately named Larry and Moe (Curly is a polishing robot located in another part of the 150,000-square-foot plant), fit the hot steel rod into a die slot, moving away before nine tons of hammer forge descend loudly and rapidly on the steel. The floor vibrates with each of the five strikes while the robots line up the next piece of steel destined to become part of a pair of Channellock pliers.
For more than 125 years, Channellock Inc. has been a household name. It’s known for its American-made, high-quality hand tool with a distinctive blue handle and is used by everyone from do-it-yourselfers to professionals like electricians and plumbers.
Channellock pliers have been made by the DeArment family since 1886 when George B. DeArment, a blacksmith from Evansburg, Pennsylvania, began hand-forging farrier’s tools in a small factory, selling the tools from town to town out of the back of a wagon.
In 1932, Channellock created its signature 12-inch tongue-and-groove plier and applied for a trademark on both the plier and the name Channellock. “The application fee was $7.50, the attorney’s fee was $15, and the trademark was granted in three weeks,” says Channellock CEO and Chairman William DeArment (the founder’s great-grandson). Today, he is joined by the next generation of DeArments—his children Jon, Ryan, and Joanne.
Innovation at Channellock is not only about the newest product; it’s about improving the products that already exist. “[A pair of pliers] is a pretty basic tool,” says DeArment. “People have tried to change and alter it, but they always come back to the same pattern.”
Still, the process is always evolving and improving. “Process enhancements within our manufacturing departments are ongoing, such as laser-heat treating technology and robotics in the forging, polishing, and machining arenas,” DeArment says.
Even small changes can lead to big results. DeArment points to a pair of joint cutting pliers that have been on the market for 18 months. “We reduced the size of the rivet and moved it closer to the cutting edge, so we’re achieving a much easier cut. The laser-edging allows a longer cutting-edge life. That’s innovation—moving that rivet a 32nd of an inch toward that cutting edge.”
Innovation in America
Americans have always tackled pressing challenges with new ideas. In fact, plain old-fashioned know-how, such as that displayed by George DeArment and his successors, is critical for getting the economy back on track and solving problems in health care, energy, and the environment.
At the national level, policymakers and business leaders can and must do more to foster innovation. It will keep the economy humming, the nation’s businesses competitive and hiring, manufacturers producing, the standard of living rising, and wages high.
Five Essential Tools For Innovation
Talent. Human capital is the primary driver of innovation. The United States needs the brightest minds to generate ideas and inventions. It needs entrepreneurs to bring life to these ideas and, ultimately, products and services to market. The nation needs skilled workers to do the knowledge work necessary to support the innovation industries, such as software, advanced manufacturing, and health technology.
Reforming the nation’s immigration system would help companies attract and retain more of the world’s best talent and hard workers. “If we could get immigration policies changed to get more professional people in here and hire them so they could be of use to the domestic industry, that would be appreciated,” says DeArment.
A competitive workforce is also necessary to stay ahead in a global economy. The Chamber is fighting to overhaul public K–12 schools, emphasize fundamental disciplines like reading and math as well as the STEM (science, technology, engineering, and mathematics) fields, and promote lifelong learning and continuous job training.
Capital. Channellock’s founder George DeArment took a chance in 1902 when the local chamber of commerce offered him a $5,000, 4.5% interest loan to move his budding manufacturing company from Conneaut Lake, Pennsylvania, to Meadville, located 10 miles away. “I have a way of thinking that’s one of the first development loans in our area, but I don’t know that for sure,” his great-grandson says.
Inventors and entrepreneurs require access to capital to help breathe life into their ideas and bring them to market. Many startups rely on seed capital from family members, wealthy individuals, local banks, credit unions, and even credit cards to get off the ground. Large established firms also routinely turn to America’s vast pools of capital so that they can invest in new products or services to satisfy market demand. This capital investment creates a virtuous cycle—ideas that are transformed into products or services generate revenue that is often poured back into research, development, and discovery, leading to even more innovation, jobs, and growth. This is the process that yields advanced industrial techniques and more efficient business operations.
The Chamber supports efforts to keep U.S. markets open and efficient and believes it’s critical to provide investors with predictable rules of the road so that they can take appropriate risks. It opposes measures that strangle capital formation or choke off the flow of financing.
Competitive business environment. A tax, regulatory, and legal climate that enables companies to continuously innovate, unshackled by needless delays and burdensome costs, is essential. However, when the federal government’s tax and regulatory policies are excessive, it breeds uncertainty, slows investment, depresses new technologies, drives manufacturing overseas, and puts businesses at a competitive disadvantage.
DeArment points to the United States’ antiquated tax system. “The tax code is problematic. I feel it punishes growth and success and rewards consumption because when you look at the kinds of taxes we pay, they all punish growth—capital gains, state tax, dividends, corporate—those kind of taxes stop growth. The United States has become the highest tax country in the world, and that puts us at a competitive disadvantage to some of our international competitors.”
The Chamber calls on lawmakers to lower both the individual and corporate tax rates and adopt a territorial system to ensure that our businesses aren’t taxed twice on revenue they earn overseas. Congress should also make the R&D tax credit permanent so that the private sector can continue to drive innovation.
In addition, businesses need a rational regulatory regime that balances costs and benefits, avoids redundant and duplicative rules, and eliminates needless regulations. They also need legal reform to bring down litigation costs and reduce precautionary expenses related to tort risk.
Strong intellectual property. In a global knowledge-based economy, strong intellectual property (IP) protections are important to ongoing innovation and competitiveness. The entrepreneurs and inventors who drive innovation must have assurances that their ideas and investments will be rewarded with rights and protections. Without such assurances, the incentive to innovate will decline.
IP is a central part of Channellock’s competitive “toolkit.” Not only is the word Channellock trademarked, so is the chevron design on the Channellock trademark, along with the most popular plier series numbers—420, 430, and 440.
The most recent and exciting part of the IP toolkit, according to DeArment, has been the trademarking of Channellock’s signature blue color—Pantone 299-C. “Back in 1987 when we actually received the trademark, this was what they called cutting-edge trademark law. It’s very difficult to get a color protected,” DeArment says. “If you go into any retail setup where hand tools are, and you see Channellock products, this jumps off the wall. People look for this brand. They look for this color because it signifies quality, reliability, dependability, good value.”
The DeArments are also protective of their IP and trademark blue handles. “We go to hardware shows around the world, and we’ll see people trying to copy it. We’ll go into the booth and demand they take it down. If not, we’ll find a legal solution to the problem. We’ve done that several times. The word has gotten out,” DeArment says. “About 10 years ago, we saw a reduction in efforts to infringe on our intellectual property, but that doesn’t mean it stops. It goes on and on and on, and we police it all the time.”
The Chamber believes that the United States should lead by example, promoting adequate and effective IP rules and enforcement at home and abroad. Officials also need to crack down on IP theft, piracy, and rogue websites; fully fund IP enforcement; and negotiate strong IP protections in trade and investment treaties.
A fiscally responsible government. A government that can responsibly manage its finances is important to a society poised for continued advancement. America’s looming entitlement crisis poses a great threat to innovation and competitiveness.
Without reform, Medicare, Medicaid, and Social Security are headed for bankruptcy. The United States is using every dollar of federal tax revenue to try and sustain the programs; nevertheless, they’re eventually going to run out of cash. As long as federal revenue goes entirely toward mandatory spending, the country won’t be able to invest in national priorities. There will be no money left for things like education, science, technology, and the basic research that lays the groundwork for much of the nation’s innovation. The Chamber is leading business community efforts to help find smart solutions to the many issues that these programs face.
While U.S. Chamber members like the DeArments aren’t waiting around for government action to make innovation happen—Channellock is introducing a line of American-made screwdrivers and has plans for a line of small electronic pliers in early 2015—federal policymakers can put policies in place that would ignite an innovation boom to drive stronger growth into the economy, create jobs for the nation’s workers, and keep America on the leading edge.